Search results

Research on the use/disclosure of intellectual capital (IC) information by sell‐side analysts, using content analysis of their reports, is growing. This paper aims to establish the importance of this perspective in understanding the role of IC in communicating firm value, to introduce possible theoretical frameworks to interpret the findings of such studies, and to propose methodological developments.

The paper argues for the need to look at IC from the perspective of sell‐side analysts, and then advocates the use of several theoretical frameworks to enrich current understanding of the role of IC as it is used/disclosed by sell‐side analysts. Current methodologies used in this type of research are critiqued with a view to proposing multiple research methods.

Looking at IC from the sell‐side analyst perspective helps us to understand how the capital market appreciates this information. However, IC information that analysts disclose cannot be taken at its face value. Issues of signalling, analysts' incentives/influences, political economy view and globalisation are introduced as providing theoretical frameworks for explaining IC disclosure in sell‐side analysts' reports. To obtain a richer picture of the role of IC information in analysts' decision processes, multiple research methods are proposed.

The proposals in this paper may inform and guide future research on IC information use/disclosure by sell‐side analysts with theoretical underpinnings and methodological rigour.

This paper is the first attempt to propose possible theories for interpreting findings of studies on IC use/discsloure by sell‐side analysts and suggest multiple research methodologies in this type of research.

The purpose of this paper is to shed light on the nature of the work that financial analysts actually do in the context of the market for information and to further open up research in this area to qualitative and sociological inquiry.

A field study with 49 financial analysts (both buy-side and sell-side) was undertaken in order to understand the work that they actually do. This field study was theoretically informed by the sociology of Pierre Bourdieu.

The authors find, in contrast to both conventional wisdom and assumptions in prior (mostly quantitative) literature, that the primary value of sell-side analyst work lies not in the recommendations that analysts ultimately produce, but in the rich contextual information that they provide to buy-side analysts. In order to successfully provide this information, analysts have to embody large amounts of technical capital into their habitus.

Much research in this area erroneously presumes that forecasting is the primary function of analysts. Analyst work needs to be understood as multifarious and requiring a well-developed habitus that is attuned to the accumulation of both technical and social capital. Future qualitative research might usefully explore in more detail the way in which corporate managers interact with analysts. The present study solicits the viewpoints only of the analysts themselves. The organisational context of the analysts was not explored in detail and the interviews were pre-crisis, which possibly explains why the technical capital of sell-side analysts was extolled by interviewees rather than lambasted.

The paper is one of few studies to look at analysts from a qualitative and sociological perspective. It both complements and extends both emerging sociological work on financial intermediaries and qualitative work on the “market for information”.

In the backdrop of emerging market setting of India, this study aims to attempt to identify how Institutional investors use sell side analyst outputs for their decision-making processes in light of inherent biases in their forecasts and recommendations. The study also conceptualizes the role of internal buy side teams in the process and try to figure out the key attributes and services provided by sell side analysts, which provide maximum value to the investors.

The study is centered upon in-depth semi-structured interviews of ten institutional investors from top Indian asset management companies covering a wide range of topics tied back to theoretical explanations. The data collected was transcribed, coded and analyzed using content analysis to ensure a systematic synthesis of point of view.

The findings show that internal analyst teams of institutional investors play a dominant role in terms of validation of sell side analysts’ outputs (given the inherent biases in sell side analyst forecasts). Further, the engagement of sell side analysts by the investors are determined not only through profitable recommendations but also on the basis of soundness of the investment rationale along with other services provided. Finally, this study puts into perspective, the critical role of analyst industry knowledge and access to company management (as opposed to analyst pedigree and forecast accuracy) for institutional investors decision-making.

The findings of the paper have profound implications for various stakeholders such as companies, sell side analysts, policy makers, researchers and students of finance in terms of detailed understanding of investment processes of institutional investors in the context of emerging markets like India, which have a different legal and regulatory set-up compared to developed markets. The authors also provide a critical perspective through an intriguing paradox that exists between finance theory and its relevance for actual practitioners.

To the best of the authors’ knowledge, this is the first study in India which look inside the “black box” of institutional investors and their decision-making process, especially with respect to how they use sell side outputs.

Motivated by significant global developments affecting the sell-side industry, in particular a shift toward passive investments and growing regulation, this study examines whether financial analyst coverage declined over the past decade and if any loss of analyst coverage is associated with a change in forecast accuracy.

After investigating, and confirming, a general decline in analyst following, the authors calculate the loss of analyst coverage relative to the firm-specific maximum between 2009 and 2013. In multivariate analyses, the authors then examine whether this loss of coverage differs across geographic region, firm size and capital market development, and whether it is associated with consensus analyst accuracy.

Results indicate that between 2011 and 2021, firm-specific analyst coverage globally declined 17.8%, while the decline in the EU was an even greater, 28.5%. Within the EU, results are most pronounced for small-cap firms. As a consequence of the loss of coverage, the authors observe a global decline in forecast accuracy, with EU small-cap firms and firms domiciled in EU non-developed capital markets faring the worst.

This study is the first to document a concerning global decline in analyst coverage over the past decade. The study results provide broad-based empirical support for anecdotal reports that smaller firms in the EU and those in EU non-developed capital markets bear the brunt of consequences stemming from changes in the sell-side analyst industry.

The purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.

The sample of this study is based on a dataset from a panel of 246 Malaysian public listed companies for the period 2008 to 2013 (651 company-year observations). This study employs feasible generalized least squares regression.

This study finds a negative and significant relationship between restated companies and sell-side analysts' stock recommendations, which means that sell-side analysts issue less favorable stock recommendations for restated companies.

The findings based on observations from an emerging economy complement the results of the US studies that analysts revise their earnings forecasts or recommendations downwards or drop coverage following financial restatements. The results of this study should be useful to capital market participants in understanding how analysts perceive and evaluate restated companies.

This paper expands the literature on financial restatements consequences in an emerging market which is largely unstudied. Prior research on analyst behavior towards restatements has focused on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion. This study examines if and how the restatements affect the analysts' final output as reflected in the recommendation opinion, an area that has so far received little attention.

To explain that, unlike with Sarbanes‐Oxley, relatively low‐cost technologies and procedures are becoming widely accepted for helping institutional money managers and hedge funds to comply with reforms to increase the transparency, documentation, and justification of “soft dollars”. Soft dollars are commissions that money managers pay to brokerage firms above and beyond actual trading execution costs.

The article examines two such technologies by surveying different offerings and reviewing in detail market‐leading systems. The first technology examined is trade‐idea communication and management systems, which capture and analyze quantitative information about equity‐trade ideas. The second technology is broker review systems, which capture and analyze qualitative information on proprietary brokerage and research services. Both trade ideas and proprietary brokerage services are paid for through soft dollars and generate approximately 50 percent of an estimated $18 billion in annual brokerage commissions for Wall Street.

There are three primary reasons why these technologies and procedures cost much less than those used to enforce Sarbanes‐Oxley. Technologically, they have features that keep costs low, encourage use, facilitate customization and leverage existing data. Operationally, they automate practices already in place, capturing lost value and generating important management information. From a regulatory point of view, they do not require the documentation and testing of controls in advance, as Sarbanes‐Oxley does – procedures that can only be defensively accomplished by outside auditors and attorneys. Instead, money managers are being asked to capture and evaluate management information, which, in turn, they are using to increase productivity.

Rather than avoiding soft dollars for fear of the regulatory overhead, or developing complicated and expensive legalistic procedures, institutional money managers and hedge funds are using relatively low cost technology to enforce “soft dollar” compliance. At the same time, they are generating valuable management information that is helping them to become more productive.

The objective of this paper is to examine the use of indicators of intellectual capital (IC) by financial analysts employed by brokerage firms, so‐called “sell‐side analysts”, and based on the findings draw conclusions on the perceived usefulness of different categories of indicators.

The basis for the paper is a content analysis of 250 sell‐side financial analyst reports written on a respective number of randomly selected S&P 500 companies. The study describes the use of IC information as leading indicators of future performance and identifies the contextual factors related to the use of such indicators.

The results reveal frequent use of IC indicators in analyst reports. Statistical analysis of the results indicates industry to be a contextual factor that is significantly related to the number of indicators used. Moreover, a majority of the IC indicators refer to relational capital, whereas indicators on human and structural capital are less frequent.

Information on the use of IC indicators is relevant to companies in their information disclosure process. Furthermore, understanding the behavior of users of financial information facilitates the work of standard setters.

The purpose of this paper is to increase the transparency of the value‐creation chain in the stock market. It aims to: conceptualize the value‐added through the relational capital, inductively develop models on how values are created, and discuss the values created for the analyst firm, the clients and investors in the stock market in general.

The paper is based on a case study of sell‐side analysts at a big Swedish investment bank and their work with real life situations of changes in recommendations.

The findings of the case study indicate that analysts, through their relational capital, access competitive advantages needed for remaining on a highly competitive market. They get access to value‐added information and knowledge and also business for the firm. This helps them to fulfill the three roles played, i.e. as information intermediaries, knowledge builders and businessmen. However, the analysts' dependencies, due to their relational capital and the analysts' conflicting roles, result in ambiguous or even biased information. The values added to clients differ between prioritized clients who receive value‐added information through the relational capital with the analysts and non‐prioritized clients with limited, or no access, to the analysts' services.

Value created through relational capital within organizations has been intensively studied within the area of intellectual capital. However, the sell‐side analysts' value‐creation chain linked to their relational capital with company representatives and clients, considered in the present study, has been neglected.

This paper investigates herding behavior and its persistence among foreign institutional investors (FIIs) in the individual stocks of the energy sector of Indian stock exchange by focusing on post turmoil period. The study also examines the relation of herding with the individual return, market return, trading volume and conditional volatility of individual and market return.

The presence of herding is investigated by Lakonishok et al. (1992) model, value-based and count-based herd ratio measure among FIIs in individual stock of energy sector post turmoil period. Further, run test was employed to check the persistency in herding and multivariate distributed lag to investigate the relationship with the market determinant.

The result indicates the existence of herding in most of the companies and strong persistence in all the companies. The intensity of buy side herding is higher than sell side. Herding and individual return both are significant driving forces of FIIs herding, while trading volume and market volatility in few companies exhibit inverse relationship.

This study is limited to investigation of energy sector stock.

Stock market is significantly influenced by FIIs and their propensity to herd may generate instability in the stock market. Therefore, regulatory authority should continuously monitor the flow of fund by FIIs.

Herding in the individual stock of the energy sector was not previously performed.

The purpose of this paper is to explore the perception of environmental, social and governance (ESG) criteria by mainstream investors in an emerging financial market, that of Tunisia, country at the origin of the Arab Spring.

A series of focus groups and semi-structured interviews were conducted with financial professionals.

Despite efforts by the Tunisian state to promote CSR and ESG criteria since the outbreak of the revolution of January 14th, 2011, the results show that these criteria are fairly well known by our interlocutors. As part of an investment allocation decision, the ESG criteria are considered as secondary to financial ones. The three criteria are classified as follows according to their usefulness in the investment choices of financial professionals: corporate governance, social and environmental.

In addition to the subjective nature of the data collected, this research is limited to the input of only financial professionals. It does not inform us about ESG indicators that may influence the investment decisions of financial professionals, and thus this issue deserves further reflection.

This exploratory study sheds light on a little-explored topic in Tunisia, country at the origin of the Arab Spring. It contributes to the existing literature in the areas of investor behavior toward ESG criteria and adds to the limited literature in the area of emerging countries.